- Bithumb mistakenly credited hundreds of users with $40 billion in “phantom” Bitcoin after an employee entered “BTC” instead of “KRW” for a $1.40 reward.
- The error caused a 16% flash crash on the exchange as users rushed to sell, though 99.7% of the funds were recovered within minutes.
- Bithumb will cover the remaining $9 million loss using corporate funds while facing an on-site inspection from South Korean regulators.
Well, just by looking at the title, this is one of those stories where we surely know someone is in deep trouble after screwing up badly.
This time, leading Korean exchange Bithumb said it will use its own funds to cover about US$9 million (AU$13 million) in losses after an internal error during a promotional payout briefly credited customers with a combined US$40 billion (AU$61 billion) worth of Bitcoin (BTC) on its platform.
That’s right; probably the best airdrop ever for a few lucky individuals, but unfortunately for them it only lasted for a few minutes, as Bithumb froze the funds, and had to convince the users to manually return the BTC.
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Fat Fingers?
The incident stemmed from a “Random Box” giveaway meant to distribute small rewards of 2,000 Korean won (worth approximately US$1.40 or AU$1.99) to each user. Instead, due to a configuration error, Bitcoin was selected as the payout unit, causing some users to be credited with Bitcoin worth hundreds of thousands of dollars, rather than small cash-equivalent rewards.
The “Bitcoin”, at least on paper, did not move on-chain. Bithumb characterised the event as phantom balances created in its internal ledger, which nonetheless appeared in user accounts and could be used to place orders before controls were applied.
Some recipients attempted to sell immediately, and a small number reportedly liquidated or swapped into other cryptocurrencies, including Ether, before restrictions took effect.
The rush to sell triggered a brief dislocation in Bithumb’s BTC/KRW market.
BTC prices on the exchange fell about 15.8% below other venues, with BTC trading as low as 81 million won, or about US$55K (AU$84K), while broader market prices were relatively stable. Bithumb said prices normalised in roughly five minutes.
Bithumb then claimed it detected abnormal transactions through internal controls and restricted trading in affected accounts shortly after. It added that its liquidation-prevention system worked as intended and prevented forced-liquidation cascades linked to the temporary price move.
South Korean financial regulators have launched an on-site inspection, according to local reports, amid scrutiny over internal processes and reports that the exchange had been close to implementing a system designed to prevent the type of error that occurred.
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